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44 Tamas Kocsis
1989: 26). According to this theory, the value of the goods and services does not
simply evolve on the basis of individual preferences. Rather, these preferences must
be used as the basis for defining their value (normativity). As exploring the
preferences of future generations is impossible, one must resort to the subjective
judgment of the present generation as it appears on the market whenever one
considers the use of resources and the natural environment. Neoclassical economists
think that there is no inherent law in the environmental or social systems that
ought to influence the evaluation and use of resources. Market failures, of course,
provide arguments for community (state) intervention, but such intervention is
rather alien to this theoretical framework (Christensen 1989: 27; cf. Pearce — Turner
1990: 11).
The cradle of neoclassical economics was the so-called marginal revolution.
Menger (1871) properly identified the role of raw materials and intermediate
(half-ready) products in the production of goods. He also clearly recognized fixed
rates among inputs. However, in his theory on the role of prices, he had to postulate
the discretional substitutability of inputs so as to evaluate the effect of the presence
or absence of a specific factor (Christensen 1989: 24). In his theory of capital,
Jevons (1871) eliminated the difference between fixed and circulating capital. He
thought that fixed capital was a more durable version of circular capital, and by
circular capital, he understood solely the food and lodging necessary for the
subsistence of laborers. In this way, his theory of capital completely ignored the
significance of machines, raw materials and industrial fuel (Christensen 1989: 23).
The final version of the mistaken idea that each input independently contributed
to the output was Walras’ General Equilibrium Theory (1874). Just as the croplands
provide a harvest year by year, so too do machines, tools and equipment — under
the mistaken agricultural analogy. But the theory is silent about how this process
continues without the material and energy needed for the activity (Christensen
1989: 24; cf. 1991: 78).
Just as classical economics was formed into a coherent system by Adam Smith,
Alfred Marshall (1920), through the mediation of Wicksell, composed a whole
from the findings of the marginal revolution. Marshall’s indecision and his
cautiousness about the concept of marginal utility suggest that he was aware of
the material implications of production and that he realized the incompatibility
of this fact with marginalist equilibrium theory. He reiterated the flow of materials
in economic growth, but this view is not reflected in his theory of production
(Christensen 1989: 25).
Marshall accepted the law of diminishing returns in agriculture, but in his view,
rising prices stimulated new organizational solutions and improvements in
knowledge. Hence, in the final analysis, the fact did not put a constraint on
economic growth. He differentiated between renewable and exhaustible resources
and only held the law of diminishing returns to be true of the former. Concerning
non-renewable resources (e.g., mines), the decrease of stocks calls for more and
more cost-intensive extraction solutions. Gradual depletion, similarly to the more
intensive use of renewable resources, is to be reflected by rising prices. Marshall
acknowledges the alternative services of nature as recognized by Mill (e.g., the
beauty of the landscape, etc.). In his view, they have no direct monetary value, yet
on the market their price is usually lower than their actual value (Babier 1989:
16-18).